<PAGE>   1

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549



                                    FORM 10-Q

(Mark One)

  X      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----    EXCHANGE ACT OF 1934

For the quarterly period ended        September 30, 1997
                               ------------------------------------------------

                                       OR

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
-----    EXCHANGE ACT OF 1934

For the transition period from               to
                               -------------     -------------

                        Commission file number 000-22298
                                               ---------

                         Scientific Games Holdings Corp.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Delaware                                     58-1943521
--------------------------------------------------------------------------------
(State or other jurisdiction of               (IRS identification no.)
   employer)

1500 Bluegrass Lakes Parkway, Alpharetta, Georgia    30004
--------------------------------------------------------------
(Address of principal executive offices)            (Zip code)


Registrant's telephone number, including area code (770) 664-3700
                                                   ------------------

--------------------------------------------------------------------------------
   Former name, former address and former fiscal year, if changed since
   last report.


                                        1


<PAGE>   2





         Indicate by check [X] whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                                    Yes  X            No 
                                        --------          --------

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Indicate by check [X] whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                                    Yes               No 
                                        --------         ---------

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 11,875,561 shares of
Common Stock, $.001 par value per share, as of November 4, 1997.











                                        2


<PAGE>   3







                         PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                    Page No.
                                                                    --------

<S>                                                                 <C>
Item 1.   Consolidated Condensed Financial Statements

          Consolidated Condensed Balance Sheets
               September 30, 1997 and December 31, 1996..................4

          Consolidated Condensed Statements of Income
               Three-month period ended September 30, 1997
               and September 30, 1996
               Nine-month period ended September 30, 1997
               and September 30, 1996....................................5

          Consolidated Condensed Statements of Cash Flows
               Nine-month period ended September 30, 1997
               and September 30, 1996....................................6

          Notes to Consolidated Condensed Financial Statements...........7


Item 2.   Management's Discussion and Analysis of Financial
               Condition and Results of Operations......................10


                   PART II - OTHER INFORMATION

Item 1.   Legal Proceedings.............................................17

Item 2.   Changes in Securities.........................................17

Item 4.   Submissions of Matters to a Vote of Security Holders..........17

Item 6.   Exhibits and Reports on Form 8-K..............................18

SIGNATURES..............................................................18
</TABLE>




                                        3


<PAGE>   4



                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                         SCIENTIFIC GAMES HOLDINGS CORP.
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                        (In Thousands except share data)


<TABLE>
<CAPTION>
                                                                    September 30,        December 31,
                                                                        1997                 1996
                                                                    -------------        --------------
                                              ASSETS                 (unaudited)              (1)

<S>                                                                 <C>                  <C>      
CURRENT ASSETS:
  Cash and cash equivalents ................................          $   2,319           $   6,252
  Trade receivables ........................................             32,029              27,045
  Inventories ..............................................             12,299              11,290
  Prepaid expenses and other current assets ................              2,315               1,547
  Deferred income tax benefit ..............................              2,611               1,254
                                                                      ---------           ---------
         Total current assets ..............................             51,573              47,388

PROPERTY AND EQUIPMENT, AT COST:
  Land .....................................................              2,521               2,521
  Buildings ................................................             11,662              11,719
  Production and other equipment ...........................             87,669              69,806
  Construction-in-Progress .................................              3,277                 994
                                                                      ---------           ---------
                                                                        105,129              85,040
  Less accumulated depreciation and amortization ...........             42,556              33,029
                                                                      ---------           ---------
                                                                         62,573              52,011
OTHER ASSETS:
  Goodwill, net of amortization ............................             34,587              23,921
  Other assets .............................................             12,465               4,209
                                                                      ---------           ---------
                                                                      $ 161,198           $ 127,529
                                                                      =========           =========

              LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable .........................................          $   5,898           $   8,280
  Accrued liabilities ......................................             27,301              14,319
  Income taxes payable .....................................              3,825               2,854
                                                                      ---------           ---------
        Total current liabilities ..........................             37,024              25,453

LONG-TERM LIABILITIES:
  Credit facility ..........................................             27,165               3,984
  Other long-term liabilities ..............................                806                 745
  Deferred income taxes payable ............................              3,360               3,558
                                                                      ---------           ---------
        Total long-term liabilities ........................             31,331               8,287
                                                                      ---------           ---------

STOCKHOLDERS' EQUITY:
  Common stock par value $.001 per share:
    shares authorized: 25,750,000;
    issued and outstanding shares: 11,874,878 at September
    30, 1997 and 12,158,362 at December 31, 1996 ...........                 12                  12
  Additional paid-in capital ...............................             57,526              56,486
  Retained earnings ........................................             34,749              36,671
                                                                      ---------           ---------
                                                                         92,287              93,169
  Less notes receivable from officers for the sale
    of common stock ........................................                (71)                (71)
  Cumulative foreign currency translation adjustment .......                627                 691
                                                                      ---------           ---------
         Total stockholders' equity ........................             92,843              93,789
                                                                      ---------           ---------
                                                                      $ 161,198           $ 127,529
                                                                      =========           =========
</TABLE>

(1) Derived from audited financial statements

    See accompanying notes.




                                        4


<PAGE>   5



                         SCIENTIFIC GAMES HOLDINGS CORP.
                   CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                      (In Thousands except per share data)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                  Three-month period           Nine-month period
                                                  ended September 30,          ended September 30, 
                                                  1997           1996          1997          1996
                                                  ----           ----          ----          ----

<S>                                             <C>            <C>           <C>           <C>     
Revenues .................................      $ 50,669       $ 38,210      $146,792      $102,363
Cost of revenues excluding
  depreciation and  amortization .........        33,026         22,752        92,658        62,701
                                                --------       --------      --------      --------
                                                  17,643         15,458        54,134        39,662

S, G & A expenses excluding
  depreciation and amortization ..........         6,267          3,968        18,115        12,527
                                                --------       --------      --------      --------



Depreciation and amortization ............         3,705          2,130         9,412         6,500
                                                --------       --------      --------      --------
                                                   7,671          9,360        26,607        20,635

In-process R&D write-off .................             0              0        10,102             0

Pull-tab business write-off (credit) .....          (624)             0         3,376             0
                                                --------       --------      --------      --------




Interest income ..........................            73            209           287           789
Gain/(Loss) on foreign currency ..........           (77)           274            51           670
Interest expense .........................           368             14           640            45
                                                --------       --------      --------      --------

Earnings before income taxes .............         7,923          9,829        12,827        22,049

Income tax expense .......................         2,893          3,935         8,963         8,835
                                                --------       --------      --------      --------

Net earnings .............................         5,030       $  5,894      $  3,864      $ 13,214
                                                ========       ========      ========      ========

Earnings per common share ................      $    .41       $    .45      $    .31      $   0.98
                                                ========       ========      ========      ========

Weighted average number of
  common and common equivalent
  shares outstanding .....................        12,287         12,991        12,482        13,493
                                                ========       ========      ========      ========
</TABLE>


See accompanying notes.




                                        5


<PAGE>   6



                         SCIENTIFIC GAMES HOLDINGS CORP.
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
                                   (unaudited)





<TABLE>
<CAPTION>
                                                                    Nine-month period
                                                                   ended September 30,

                                                                   1997           1996
                                                                   ----           ----
<S>                                                             <C>            <C>     
CASH FLOWS FROM OPERATING ACTIVITIES
   Net earnings ..........................................      $  3,864       $ 13,214
   Adjustments to reconcile net earnings
     to net cash provided by operating
     activities:
         Depreciation ....................................         7,492          6,252
         Amortization of intangibles .....................         1,920            248
         Gain/(loss) on disposal of property and equipment          (112)             5
         Stock compensation expense ......................           995          2,154
         Other ...........................................            66              0
         Deferred taxes ..................................        (4,453)             0
         Changes in operating assets and liabilities:
            Accounts receivable ..........................          (878)        (4,910)
            Inventories ..................................         1,454         (2,916)
            Prepaid expenses and other assets ............         3,831           (314)
            Accounts payable .............................        (6,901)        (1,085)
            Accrued liabilities ..........................         9,989           (257)
            Income taxes payable .........................           984          2,260
                                                                --------       --------
     Net cash provided by operating activities ...........        18,251         14,651

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from sales of property and equipment .........            75             45
   Purchases of property and equipment ...................       (14,051)        (2,669)
   Acquisitions of businesses net of cash acquired .......       (24,921)             0
                                                                --------       --------
     Net cash used in investing activities ...............       (38,897)        (2,624)


CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on notes receivable ..........................            16             28
   Borrowings under credit facility ......................        30,360              0
   Proceeds from long term debt ..........................             0          8,000
   Repayment of debt .....................................        (7,826)             0
   Payments on capital lease obligation ..................           (92)          (444)
   Repurchase of common stock ............................        (5,787)       (23,408)
   Proceeds of exercise of common stock options ..........            42              0
                                                                --------       --------
     Net cash provided by (used) in financing activities .        16,713        (15,824)
                                                                --------       --------


NET DECREASE IN CASH AND CASH EQUIVALENTS ................        (3,933)        (3,797)
CASH AND CASH EQUIVALENTS, beginning of period ...........         6,252         26,415
                                                                --------       --------
CASH AND CASH EQUIVALENTS, end of period .................      $  2,319       $ 22,618
                                                                ========       ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
   Cash paid for interest ................................      $    461       $     47
                                                                ========       ========
</TABLE>




See accompanying notes.

                                        6


<PAGE>   7




                         SCIENTIFIC GAMES HOLDINGS CORP.
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (unaudited)



1.       Basis of Presentation

              The accompanying unaudited consolidated condensed financial
         statements have been prepared in accordance with generally accepted
         accounting principles for interim financial information and in
         accordance with the instructions to Form 10-Q and Article 10 of
         Regulation S-X. Accordingly, they do not include all of the information
         and footnotes required by generally accepted accounting principles for
         complete financial statements and should be read in conjunction with
         the financial statement disclosures contained in the Company's 1996
         Annual Report on Form 10-K for the year ended December 31, 1996. In the
         opinion of management, all adjustments considered necessary for a fair
         presentation (which were of a normal, recurring nature) have been
         included. Operating results for the three and nine month periods ended
         September 30, 1997 are not necessarily indicative of the results that
         may be expected for the year ended December 31, 1997.

2.       Inventories

              Inventories consist principally of lottery tickets and materials 
         related to their production, which are valued at the lower of cost
         (first-in, first-out method) or market. Inventories consisted of the
         following:

<TABLE>
<CAPTION>
                                         September 30,  December 31,
                                             1997           1996
                                         -------------  ------------
                                               (In Thousands)

            <S>                          <C>            <C>
            Finished goods ..........      $ 5,932        $ 4,684
            Work-in-process .........        2,340          2,468
            Raw materials ...........        4,027          4,138
                                           -------        -------
                                           $12,299        $11,290
                                           =======        =======
</TABLE>

3.       Contingencies

              Refer to the Company's Form 10-K for the year ended December 31,
         1996 for a description of pending legal proceedings, with respect to
         which there have been no material developments since such date, except
         that Ecosalud filed a notice of appeal on April 16, 1997 to appeal the
         judgment entered in favor of Scientific Games Inc. in the Georgia
         Litigation described in such Item 3 of such Form 10-K. The appeal is
         pending.

4.       Acquisition

              On April 15, 1997, the Company completed its stock acquisition of
         Tele Control Kommunikations- Und Computersysteme Aktiengesellschaft
         (hereafter referred to as "SG Austria"), an on-line lottery and
         transaction company located in Vienna, Austria, from Autotote


                                        7


<PAGE>   8



         Corporation. The purchase price was $26.6 million including a post
         closing $1.7 million valuation adjustment paid to Autotote with SG
         Austria's acquired cash. The purchase was accounted for under the
         purchase method of accounting. The purchase price was allocated to
         approximately $5.1 million of net assets and to a one-time write-off of
         $10.1 million in connection with in-process research and development
         costs, with the remainder allocated to goodwill to be amortized over 15
         years.

              The following table summarizes the Company's estimated pro forma
         results of operations as if the purchase of SG Austria and Scientific
         Games International Limited ("SGIL") (collectively known as the
         "International Acquisitions") occurred on January 1, 1996 (refer to the
         Company's 10-K for the year ended December 31, 1996 for a description
         of the SGIL acquisition).

<TABLE>
<CAPTION>
                                                       Nine-month period
                                                      ended September 30,
         (In thousands, except per share amounts)   1997               1996
         ----------------------------------------------------------------------
         <S>                                        <C>                <C>     
         Revenues                                   $149,561           $141,885
         Net earnings                                  3,633             13,542
         Earnings per common share                  $   0.29           $   1.00
</TABLE>


              The pro forma results presented above include adjustments to
         reflect interest expense on borrowings for the acquisitions,
         amortization of assets acquired including intangibles, certain
         management expenses related to the Company's combined operations, the
         $10.1 million in-process R&D write-off, lease expense for a building
         owned by the former owner of SGIL which was not purchased as part of
         the acquisition and the income tax effect of such pro forma adjustments
         and income taxes on earnings. The pro forma adjustments are based upon
         an allocation of the purchase price.

              These pro forma unaudited results of operations do not purport to
         represent what the Company's actual results of operations would have
         been if the International Acquisitions had occurred on January 1, 1996,
         and should not serve as a forecast of the Company's operating results
         for any future periods. The pro forma adjustments are based solely upon
         certain assumptions that management believes are reasonable under the
         circumstances at this time. However, the full impact of potential cost
         savings has not been reflected in the pro forma results presented
         above, although there can be no assurances such cost savings will be
         achieved.

  5.      Discontinued Business Line

              In July 1997, the Company discontinued its Charity pull-tab ticket
         business line which was produced and distributed by its subsidiary
         GameTec Inc ("GameTec"). The Company continued to produce pull-tab
         tickets for its state lottery customers until such time as alternate
         production facilities could be arranged for these customers. A one-time
         write-off of $4.0 million (pre-tax) was recognized for the disposition
         of the assets of this business line in the quarter ended June 30, 1997.
         In October 1997, the Company sold substantially all of the assets of
         GameTec to International Gamco, Inc. ("Gamco"). This write-off was
         recognized following the Company's decision to redeploy its resources
         and focus on the higher margin on-line and instant ticket lottery
         markets.


                                       8

<PAGE>   9



         The Company anticipates the ultimate write-off resulting from the sale
         of assets to Gamco will be less than originally anticipated and has 
         reduced the $4.0 million write-off by $624,000 (pre-tax) in the 
         quarter ended September 30, 1997.

              The Company also entered into a three year extendible marketing
         agreement with Gamco to provide marketing and related services to state
         lotteries for pull-tab tickets printed by Gamco. The Company will
         continue to provide pull-tab tickets to its lottery customers through
         the marketing agreement. Management does not believe an additional
         write-off will be necessary due to this disposition, and it is not
         expected to have a material effect on the Company's performance.

 6.      New Accounting Pronouncements

              In February 1997, the Financial Accounting Standards Board issued
         Statement No. 128, Earnings per Share, which is required to be adopted
         on December 31, 1997. At that time, the Company will be required to
         change the method currently used to compute earnings per share and to
         restate all prior periods. Under the new requirements for calculating
         primary earnings per share, the dilutive effect of stock options will
         be excluded. The impact will increase primary earnings per share $0.01
         to $0.42 per share for the third quarter ended September 30, 1997 and
         $0.02 to $0.47 per share for the third quarter ended September 30,
         1996. The impact of Statement 128 on the calculation of fully diluted
         earnings per share for these quarters is not expected to be material.

              In October 1997, AcSEC issued Statement of Position (SOP) 97-2,
         Software Revenue Recognition, that supersedes SOP 91-1. The SOP
         provides revised and expanded guidance on software revenue recognition
         and applies to all entities that earn revenue from licensing, selling
         or otherwise marketing computer software. The existing requirements for
         distinguishing between significant and insignificant vendor obligations
         as a basis for recognizing revenue are replaced by a framework to
         recognize revenue for each element (e.g., additional software products,
         upgrades, and enhancements) in a software licensing arrangement when it
         meets specified criteria. While the Company had not completely analyzed
         SOP 97-2, management does not believe this SOP will have a significant
         effect on the Company's present revenue recognition methods. The SOP is
         effective for transactions entered into in fiscal years beginning after
         December 15, 1997.



                                       9


<PAGE>   10




                         SCIENTIFIC GAMES HOLDINGS CORP.

Item 2.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations.

General

    The Company's revenues are primarily generated from the sale of instant
tickets to lotteries and promotional (commercial) customers, from the provision
of cooperative services, instant ticket hardware and software system development
and services, on-line lottery hardware and software systems and from the sale of
pull-tab lottery tickets. Instant and pull-tab revenues are generally based on a
price per 1,000 tickets. Revenues from cooperative services, instant tickets and
hardware and software development may be based on a percentage of the lottery's
sales to the public, a contracted price, a license agreement, a lease agreement
or any applicable combination of the foregoing. Current on-line revenues are
generated from the sale of hardware and software to lotteries as well as support
and maintenance contracts on the on-line systems.

    The Company's operating results may vary significantly from period to
period. Revenues and capital expenditures can be difficult to forecast because
the Company's sales cycle may vary and depend upon factors such as the size and
timing of awarded contracts, changes in customer budgets, ticket inventory
position, lottery retail sales and general economic conditions. Contracts with
governmental entities operating newly authorized instant lotteries tend to
generate higher levels of ticket sales in the initial months. All of the
Company's domestic lottery contracts currently are with jurisdictions whose
lotteries have been in operation at least one year. Operating results may be
affected by the working capital requirements associated with preparing
facilities and equipment, establishing a distribution system and printing
tickets for a recently awarded contract, and by the amount of time elapsing
between the contract award and the receipt and/or recognition of revenues from
the sale of instant lottery tickets. In addition, new cooperative services
customers may require additional resources and infrastructures that may be
required to be constructed before revenues are realized. Operating results may
also be affected by the utilization of overtime labor and the Company's ability
to smoothly integrate new and/or upgraded production equipment with its existing
production operations. Revenues from the sale of tickets, cooperative services,
hardware and software development may be recognized based upon ticket shipments,
a percentage of the lottery's sales to the public, a contracted price, a license
agreement, an equipment lease agreement or any applicable combination of the
foregoing. Lottery revenues and particular product sales to lotteries may vary
in a quarter causing fluctuations in the Company's revenue from quarter to
quarter. Additionally, circumstances encountered in international markets,
including the substantial amount of time involved in bidding on an international
contract, the evaluation of such bid and the resultant contract award or
rejection may vary significantly from that originally anticipated when the bid
is prepared. All of these factors may make it difficult to forecast revenues and
expenditures related to the Company's operations over extended periods and can
result in fluctuations in the Company's quarterly financial results.

    The Company's domestic lottery contracts typically have an initial term 
from one to three years and usually provide the customer with options
                                                                

                                       10


<PAGE>   11



to extend the contract one or more times under the same, or mutually agreeable,
terms and conditions for additional periods generally ranging from one to three
years. The Company's international lottery contracts are less likely to have
firm contract periods and, historically, international lottery ticket customers
have sought competitive bids for such contracts more frequently. The Company's
customers have exercised extension options in the Company's domestic instant
lottery contracts a majority of the time. Upon the expiration of a contract
(including any extensions which may have been exercised), lottery authorities
often award new contracts through a competitive procurement process. During any
quarter, some lottery contract is typically expiring and/or reaching an optional
extension date.

    To date in 1997, the Company has been awarded two new instant ticket or
cooperative service contracts and received six renewals of existing contracts.
The Company has been awarded the Pennsylvania Lottery contract, which was
formerly held by a competitor of the Company. This contract includes, in
addition to instant lottery tickets, marketing and operations support, ticket
warehousing, inventory control and ticket distribution. The Company also
received a five year extension from the Georgia Lottery commencing June 1998 for
its current cooperative services contract which would have expired in June 1998.
The extension was negotiated in lieu of a re-bid of the contract. Additionally,
the South Dakota State Lottery extended the Company's instant ticket and related
product services contract, which was scheduled to expire in June 1997, through
June 1998. The Washington State Lottery has also extended its instant ticket
contract, which was scheduled to expire June 1997, through May 1998. The Company
was awarded a two-year contract for the Kentucky Lottery instant tickets
commencing October 1997. The Company was awarded the Hoosier Lottery (State of
Indiana), and execution of the contract is pending. Delaware and Wisconsin also
extended their contracts with the Company. Bids have been submitted to the
Arizona Lottery to produce its instant tickets and a decision is still pending.
The Company does not believe the loss of the Arizona contract, in the event the
Company is not successful in its bid for re-award, would have a material effect
on revenue. The Company also was re-awarded approximately 60% of the instant
ticket business for the New Mexico Lottery.

    Additionally, in January 1997 the Company was awarded a 5-year contract by 
the Virginia Lottery to provide software and hardware for a new automated 
ticket redemption system. The contract includes installation of approximately
6,000 units of the Company's new SciScan Technology(R) keyless validation
terminals as well as the provision of software to interface with the Lottery's
existing instant ticket software system, and the provision of automated
administration and ticket validation support.

    Management anticipates that lottery contracts awarded or re-awarded to the 
Company in 1997 and the orders thereunder will have lower equivalent prices 
than charged in the previous contracts. The profit margin impact associated with
the potential equivalent lower prices will be dependent upon what offset the
level of orders from new and existing customers, productions efficiencies and
other economies of scale may provide. While Scientific Games has frequently been
awarded new contracts when its prior domestic contracts and extensions have
expired, there can be no assurance, however, that any of the Company's contracts
will be extended or that it will be awarded new contracts as a result of
competitive procurement processes in the future. Nor can any assurances be given
with respect to the Company's ability to offset, in whole or in part, the
effects of any intensified price competition.


                                       11

<PAGE>   12



    In April 1997, the Company purchased SG Austria, an on-line lottery and
transaction processing company located in Vienna, Austria, from Autotote
Corporation. The purchase price was $26.6 million including a post closing $1.7
million valuation adjustment paid to Autotote with SG Austria's acquired cash.
The purchase was accounted for under the purchase method of accounting. SG
Austria develops and markets specific computer software for long-distance data
transmission which is mainly used for on-line lotteries and betting-systems as
well as by banks and credit card companies. Software developed by SG Austria is
used by lotteries in Austria, Switzerland, The Netherlands and Germany. On July
18, 1997 the Company announced contracts with the lottery of the German state of
Mechlenburg-Vorpommern, the Dutch State Lottery and the German national horse
racing betting operator. These contracts are for supplying hardware, software
and a range of support systems. These contracts have a combined revenue value of
approximately $4.4 million to the Company. The purchase of SG Austria positions
the Company to re-enter the on-line lottery business. The Company has begun to
market, on a global scale, an on-line and related system based on the SG Austria
system.

    As previously announced, on May 19, 1997 the Board of Directors approved 
the purchase in the open market over twelve months of up to 15% or
approximately 1.8 million shares of the Company's common stock. The Company
currently has approximately 11.9 million outstanding shares of common stock.
During the nine-months ended September 30, 1997, the Company has purchased
302,000 shares at a purchase price of approximately $5.8 million.

Results of Operations

Three-month period ended September 30, 1997 compared to three-month period ended
September 30, 1996.

    Revenues for the three-month period ended September 30, 1997 increased
$12.5 million, or 32.7% over the revenues for the three-month period ended
September 30, 1996. The increase was primarily due to revenues of $9.9 million
from the operations of the International Acquisitions. (Refer to the Company's
10-K for the year ended December 31, 1996 for a description of the SGIL
acquisition and to Note 4 of the Notes to Consolidated Condensed Financial
Statements for a description of the SG Austria acquisition).

    Gross margins decreased to 34.8% for the three-month period ended September 
30, 1997 from 40.5% for the three-month period ended September 30, 1996. The
decrease was due primarily to lower sales volume to certain customers and lower
sales prices resulting from new contracts and renewals of existing contracts
over the last twelve months. The lower sales prices are a result of competitive
pressures on the industry. In addition, the Company did not acquire SGIL until
the beginning of the fourth quarter of 1996, the effect of SGIL's lower gross
margins are included in the three-months ended September 30, 1997 and not the
three-months ended September 30, 1996.

    Selling, general and administrative (SG&A) expenses increased $2.3 million, 
or 57.9% for the three-month period ended September 30, 1997 compared to the 
three-month period ended September 30, 1996. SG&A expenses increased as a
percentage of revenues to 12.4% from 10.4%. The dollar increase was due
primarily to the additional costs associated with the operations of the
International Acquisitions, additional personnel costs and increased sales and
marketing activities. The percentage of revenue increase is attributable to


                                       12

<PAGE>   13



the Company experiencing higher SG&A costs as a percentage of revenue in the
three-month period ended September 30, 1997 at both SGIL and SG Austria
compared to the Company's SG&A expenses experienced in prior periods before the
International Acquisitions.

    Depreciation and amortization increased $1.6 million, or 73.9% for the
three-month period ended September 30, 1997 compared to the three-month period
ended September 30, 1996. The increase was due primarily to the amortization of
intangible assets acquired as part of the International Acquisitions, as well as
depreciation of plant equipment acquired as part of the acquisition of SGIL and
depreciation from additional fixed assets purchased during the nine-months ended
September 30, 1997.

    A one-time write-off of $4.0 million (pre-tax) was recognized in the
quarter ended June 30, 1997, for the anticipated losses from the disposition of
assets of the Company's discontinued Charity pull-tab ticket business line. In
July 1997, the Company discontinued its charity pull-tab ticket business line.
Subsequent to the end of the quarter, the Company decided to sell its pull-tab
business assets and is subcontracting the manufacture of pull-tab tickets for
its lottery customers to the purchaser of such assets and anticipates the
write-off associated with the discontinuance of such assets will be less than
originally anticipated. In anticipation of the sale of such assets subsequent to
the end of the fiscal quarter, the Company reduced the $4.0 million write-off by
$624,000 (pre-tax) in the quarter ending September 30, 1997 (Refer to Note 5 of
the Notes to the Consolidated Condensed Financial Statements).

    Interest income for the three-month period ended September 30, 1997
decreased $136,000, or 65.1% compared to the three-month period ended September
30, 1996 The ending balances in cash and cash equivalents decreased by $20.3
million to $2.3 million. The Company primarily used this cash to fund the
purchase of the International Acquisitions, purchase additional fixed assets and
repurchase shares of the Company's common stock during the nine months ending
September 30, 1997.

    A loss of $77,000 on foreign currency was realized in the three-month
period ended September 30, 1997 compared to a gain of $244,000 in the
three-month period ended September 30, 1996. The loss was due mainly to net
foreign currency losses related to non-U.S. dollar transactions.

    Interest expense for the three-month period ended September 30, 1997
increased $354,000 or 2,528.6% compared to the three-month period ended
September 30, 1996. The increase in interest expense was due to borrowings to
fund the International Acquisitions, purchase additional fixed assets and
repurchase shares of the Company's common stock during the twelve months ended
September 30, 1997.

    Income tax expense decreased $1.0 million, or 26.5% for the three-month
period ended September 30, 1997 as compared to the same three-month period ended
September 30, 1996 due to a decrease in pre-tax earnings. The effective tax rate
for the three month periods ended September 30, 1997 and September 30, 1996 was
36.5% and 40.0%, respectively.

    As a result of the foregoing, net earnings decreased $864,000, or 14.7% to 
$5.0 million in the three-month period ended September 30, 1997 from $5.9
million for the three-month period ended September 30, 1996.


                                       13

<PAGE>   14




    Earnings per common share for the three-month period ended September 30, 
1997, was 41 cents per share compared to net earnings of 45 cents per share for 
the same period in 1996.

Nine-Month period ended September 30, 1997 compared to nine-month period ended
September 30, 1996.

    Revenues for the nine-month period ended September 30, 1997 increased $44.4 
million, or 43.4% compared to revenues for the nine-month period ended 
September 30, 1996. The increase was primarily due to revenue generated from the
International Acquisitions, which contributed $30.5 million. In addition,
revenues attributable to domestic and non-SGIL international customers increased
$9.1 million and $4.8 million, respectively.

    The increase in revenue from such domestic and international customers was 
primarily in the first quarter of 1997. Although the Company's operating 
results can vary significantly from period to period, management believes the
decline in the Company's revenues for the first quarter of 1996 was related to
customer inventory adjustments and a transition in marketing strategy on the
part of a number of customers.

    Accordingly, management believes the events of the first quarter of 1996 
did not reflect a fundamental change in the Company's business in particular, 
or the lottery industry in general, although it is expected that new contracts 
with either new or existing customers will be subject to strong price
competition.

    Gross margins decreased to 36.9% for the nine-month period ended September 
30, 1997 from 38.7% for the nine-month period ended September 30, 1996. The
decrease was due primarily to lower sales prices resulting from new contracts
and renewals of existing contracts over the last twelve months. The lower sales
prices are a result of competitive pressures on the industry. In addition, the
Company did not acquire SGIL until the beginning of the fourth quarter of 1996,
the effect of SGIL's lower gross margins are included in the nine-months ended
September 30, 1997 and not the nine-months ended September 30, 1996.

    SG&A expenses increased $5.6 million, or 44.6% for the nine-month period 
ended September 30, 1997 compared to the nine-month ended September 30, 1996.
These expenses increased as a percentage of revenue to 12.3% from 12.2%. The
dollar increase was due primarily to the additional costs associated with the
operations of the International Acquisitions, additional personnel costs and
increased sales and marketing activities. The percentage of revenue increase is
attributable to the Company experiencing a higher SG&A as a percentage of
revenue in the nine-month period ended September 30, 1997 in both SGIL and SG
Austria than those the Company has experienced in prior periods without the
International Acquisitions.

    Depreciation and amortization expenses increased $2.9 million, or 44.8% for 
the nine-month period ended September 30, 1997 compared to the nine-month
period ended September 30, 1996. The increase was due primarily to the
amortization of intangible assets acquired as part of the International
Acquisitions, as well as depreciation of plant equipment acquired as part of
the acquisition of SGIL and depreciation from additional fixed assets purchased
during the nine-months ended September 30, 1997.


                                       14


<PAGE>   15



    The Company recognized a one-time write-off of $10.1 million for in-process 
research and development acquired in connection with the April 15, 1997
acquisition of SG Austria. Management believes this write-off is consistent
with accounting practices related to other technology-based acquisitions. In
addition, the Company discontinued its Charity pull-tab ticket business line. A
one-time write-off of $3.4 million, net of $624,000 adjustment (pre-tax) was
recognized in the nine-months ended September 30, 1997, for the anticipated
losses from disposition of assets of its Lottery and Charity pull-tab ticket
business line.(Refer to Note 5 of the Notes to the Consolidated Condensed
Financial Statements)

    Interest income for the nine-month period ended September 30, 1997
decreased $502,000 or 63.6% from the nine-month period ended September 30, 1996.
The decrease was due to the lower average cash balances during 1997, resulting
from the use of cash to fund the International Acquisitions, purchase additional
fixed assets and repurchase share of the Company's common stock during the nine
months ending September 30, 1997

    Gains on foreign currency decreased by $619,000, or 92.4% due mainly to
activity related to the Company's acquisition of SGIL during the first nine
months of 1996, as well as net foreign currency gains related to non-U.S.
dollar transactions.

    Interest expense for the nine-month period increased $595,000, or 1,322.2% 
compared to the nine-month period ended September 30, 1996. The increase in
interest expense was due to additional borrowings on the Company's credit
facility to fund the International Acquisitions, purchase additional fixed
assets and repurchase shares of the Company's common stock during the nine
months ended September 30, 1997.

    Income tax expense increased $128,000, or 1.5% in the period ended
September 30, 1997 as compared to the same nine-month period of 1996 due to an
increase in pre-tax earnings related to increased revenues offset by increased
expenses. The effective tax rate for the nine month periods ended September 30,
1997 and September 30, 1996, before the one-time write-off of in-process
research and development discussed earlier, was 39.2% and 40.0%, respectively.

    As a result of the foregoing, net earnings decreased $9.4 million, or 70.1% 
to $3.9 million in the nine-month period ended September 30, 1997 from $13.2
million for the nine-month period ended September 30, 1996. Net income for the
nine-month period ended September 30, 1997, without the one-time write-offs of
in-process research and development associated with the acquisition of SG
Austria and disposition of the Charity pull-tab business line, would have been
$16.0 million.

    Earnings per common share for the nine-month period ended September 30,
1997, were 31 cents per share compared to 98 cents per share for the same period
in 1996. Earnings per share for the nine months ended September 30, 1997, prior
to the one-time write-offs discussed earlier, were $1.28 per share. The 30.6%
increase in earnings per share prior to the one-time write-offs was due to a
21.0% increase in net earnings before such write-off. The weighted average
shares decreased from 13.5 million to 12.5 million.


                                       15


<PAGE>   16


Liquidity and Capital Resources

Nine-Month period ended September 30, 1997 compared to nine-month period ended
September 30, 1996.

    For the nine-month period ended September 30, 1997, net cash provided by 
operating activities increased $3.5 million to $18.2 million from $14.7 million
for the comparable period in 1996. Cash provided by operations was used to fund
the purchase of SG Austria, additional property and equipment and to fund
working capital requirements.

    Net cash used in investing activities increased $36.3 million from the
nine-month period ended September 30, 1996. Purchases of property and equipment
for the nine-month period ended September 30, 1997 were higher by $11.4 million
compared to the nine-month period ended September 30, 1996. The Company
purchased SG Austria in April 1997 for a net purcase price of $24.9 million,
financed primarily through borrowing under the Company's Bank Credit Agreement.

    The Company's financing activities provided cash of $16.7 million and used 
cash of $15.8 million for the nine months ended September 30, 1997 and 1996
respectively. Borrowings under the Company's Bank Credit Agreement were used
primarily to fund the repurchase of the Company's common stock and the
acquisition of SG Austria (refer to the Company's 10-K for the year ended
December 31, 1996 for a description of the Company's Bank Credit Agreement).

    In connection with the October 1, 1991 acquisition of the assets of the
Company from Bally Entertainment Corporation ("Bally"), the Company agreed to
make an earn out payment (the "Earnout") of up to $5 million on April 30, 1997
if total cumulative earnings before interest, income taxes, depreciation and
amortization ("EBITDA") from October 1, 1991 through December 31, 1996 equaled
or exceeded $95.4 million. At December 31, 1996, cumulative EBITDA from October
1, 1991 exceeded $95.4 million without any Adjustments as discussed below.
Management believes that the Company has competing claims, offsets and other
potential adjustments (collectively, "Adjustments") which could reduce the
amount ultimately determined to be owed to Bally, if any. However, the effect of
such Adjustments cannot be quantified at this time and there can be no assurance
that such Adjustments ultimately will affect the timing or amount of any Earnout
payments which may be required. The maximum amount payable to Bally has been
accrued as additional goodwill and will be amortized over 34.5 years. No Earnout
payment has been made.

    The Company believes that funds provided by operations, available 
borrowings under its Bank Credit Agreement, current amounts of cash and cash
equivalents will be sufficient to meet its capital requirements and fund future
growth for at least the next 12 months.

Forward-Looking Statements

    This Quarterly Report on Form 10-Q contains certain statements and
projections (including statements concerning plans and objectives of management
for future operations and services and statements concerning certain revenue
expectations), other than those covering historical information, that should be
considered forward-looking and subject to certain risks and uncertainties. Such
forward-looking statements are based on management's belief as well as
assumptions made by, and information currently available to, management


                                       16

<PAGE>   17

pursuant to "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995. The Company's actual results might differ materially from
the plans envisioned in, or results projected by, those statements if the
Company's assumptions prove to be incorrect or for a variety of other reasons,
including those relating to factors identified in the Company's Annual Report
on Form 10-K for the year ended December 31, 1996 under the heading
"Forward-Looking Statements." The Company cautions that such factors are not
exclusive. The Company does not undertake to update any forward-looking
statement that may be made from time to time by, or on behalf of, the Company.




PART II - OTHER INFORMATION



Item 1.           LEGAL PROCEEDINGS

    Refer to the Company's Form 10-K for the year ended December 31, 1996 for a 
description of pending legal proceedings, with respect to which there have been
no material developments since such date, except that Ecosalud filed a notice
of appeal on April 16, 1997 to appeal the judgment entered in favor of
Scientific Games Inc., in the Georgia Litigation described in such Item 3 of
such Form 10-K. The appeal is pending.

    Although it is not possible to determine the outcome of these proceedings 
and claims at their current stage, management believes based upon, among other
things, the advice of counsel, that the disposition of these matters should not
have a material adverse affect on the Company's consolidated financial
condition or consolidated results of operations.


Item 2.           CHANGES IN SECURITIES

         None


Item 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    The annual meeting of the Company's shareholders was held on May 16, 1997. 
At the meeting the following matters were voted upon, with the following
results:

1. Election of Directors.  The following directors were elected, for terms
ending at the annual meeting in the year indicated:

<TABLE>
<CAPTION>
                    Term         Votes       Votes    Votes
Name of Director   Ending      In Favor     Against  Withheld  Abstentions
----------------   ------      --------     -------  --------  -----------
<S>                <C>        <C>           <C>      <C>       <C>   
Frank S. Jones      2000      8,632,252      None      None      11,963

Edith K. Manns      2000      8,633,482      None      None      10,733
</TABLE>

In addition to the Directors elected above, the Company's Directors whose
terms have not expired are William G. Malloy, Paul F. Basler, Mark E.
Jennings, Dennis L. Whipple and William F. Behm.


                                       17

<PAGE>   18

Item 6.           EXHIBITS AND REPORTS ON FORM 8-K


         (a)      Exhibits

<TABLE>
<CAPTION>
         EXHIBIT NO.                EXHIBIT TITLE
         -----------                -------------
         <S>                        <C>
             #11                    Computation of Per Share Earnings

             #27                    Financial Data Schedule (for SEC use
                                    only)
</TABLE>

         (b)      Reports on Form 8-K

                  No reports on Form 8-K were filed during the third quarter
                  ended September 30, 1997.







                                   Signatures


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                    SCIENTIFIC GAMES HOLDINGS CORP.



Date:  November 13, 1997            By: /s/WILLIAM G. MALLOY
                                        ---------------------------------
                                           William G. Malloy
                                           President and
                                           Chief Executive Officer



Date:  November 13, 1997            By: /s/CLIFF O. BICKELL
                                        ---------------------------------
                                           Cliff O. Bickell
                                           Vice President, Treasurer,
                                           and Chief Financial Officer


                                       18